Sunday, March 29, 2009

When you have 35,000 people protesting in London, prior to your arrival, nothing wrong with changing or modifying your position.

The Obama administration on Saturday moved to quell a public war of words with European leaders over the need to boost government spending to combat the financial crisis, making clear it has no desire to dictate spending targets for other countries.

The diplomatic effort comes as President Obama prepares to make his first trip across the Atlantic this week for a series of meetings, including Thursday's economic summit in London. In recent days, European leaders have sharply criticized the United States, which they said was pushing them for more global stimulus.

In other words, Europe does not want to be dictated to in how to handle their economy, especially when many are not up in arms on government money intervention to ease the crunch there.

But Europe and the United States, while set to agree on doing "whatever is necessary" to revive the economy, appear at odds philosophically over how much more government spending is necessary to jump-start the economy, now poised for the first global recession since World War II.

The administration had earlier backed a proposal for nations to spend 2 percent of the value of their economies on stimulus efforts. But officials in Europe have countered that enough public funds have been spent, with Czech Prime Minister Mirek Topolanek, whose country holds the rotating presidency of the European Union, last week describing U.S.-style stimulus spending as "the road to hell."

We don't know how this stimulus money will pan out, since much has not hit the streets yet, but I do understand why many leaders in Europe is opposed to cranking out money to solve the economic problem. But, if this works here in the U.S., watch Europe do a double take.

And the IMF, the snobs for the richest countries?

The IMF, long criticized as a club for rich countries, is also set for a dramatic change as developing nations exert greater influence at the fund. For the first time, sources said, emerging giants China, Brazil, Russia, India and Mexico are planning major financial contributions, which in turn would grant them more say in how the IMF conducts business. China is ready to produce the biggest gift, pledging an estimated $50 billion.

The United States will also press for a review of regional development agencies, such as the Inter-American Development Bank and Asian Development Bank, to ensure they are spending money wisely. An increase in the money available to them is also being considered. Geithner is set to deliver a keynote speech on the issue in Medellin, Colombia, on Sunday before arriving in London along with Obama this week.

"We need to assess how successful they are in addressing the needs of the poorest members of these institutions," a Treasury official said.

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